Switzerland, US top global 2018 Financial Secrecy Index

The three countries topping the 2018 Tax Justice Network’s Financial Secrecy Index (FSI) are; Switzerland, the United States and the Cayman Islands.

The Index released today January 30, 2018 shows Switzerland on top, followed by the US and in third place is the Cayman Islands.

According to the Tax Justice Network (TJN), these three countries are the world’s biggest contributors to financial secrecy.

The US has risen rapidly on the Index and that is considered worrying. The Network says the US’ rise in the current rankings is part of a worrying trend, indicating that this is the second time in succession that the USA has risen up the Index.

The publishers of the Index note that in 2013 the US was in 6th place, and in 2015 it took 3rd. In 2015 the country was one of the few to increase its secrecy score, it added.

The Network says, this time the increase in ranking is driven by a huge rise in America’s share of the market in offshore financial services that wasn’t neutralised by a significant reduction in their secrecy. In total, the share of global offshore financial services taken by the United States rose by 14 per cent between the 2015 and 2018 index from 19.6 per cent to 22.3 per cent, it says.

Financial secrecy, it says, is a key facilitator of financial crime, and illicit financial flows including money laundering, corruption and tax evasion. Jurisdictions who fail to contain it deny citizens elsewhere their human rights and exacerbate global inequality, it added.

TJN says Switzerland, the global capital of bank secrecy, retains the worst ranking, and the US has moved up to second. With Bahrain and Lebanon dropping out of the top ten, Guernsey and a new entry in Taiwan has replaced them.

The Financial Secrecy Index value, the Network says is obtained by combining the Secrecy Score (how secretive a jurisdiction is) with the Global Scale Weight (how big a financial centre is, in terms of financial services offered to non-residents).

The Index assesses countries against criteria which include whether companies, trusts and foundations are required to reveal their true owners, whether annual accounts are made available online in open data format, or the extent to which jurisdictions’ rules comply with anti-money laundering standards (FATF’s 40 recommendations).

This year, TJN says several new indicators have been added to the Index and existing indicators have been substantially revised to drill deeper into questions around ownership registration and disclosure.

It indicates that a total of 20 Key Financial Secrecy Indicators (KFSI) is used for the measurement of the secrecy score.

It points out that in order to create the index, a secrecy score is combined with a figure representing the size of the offshore financial services industry in each country. This is expressed as a percentage of global exports of financial services.

It says also that, the bigger player you are, the more responsibility you have to be transparent. Beyond of what has been achieved so far by academic or regulatory institutions, the new FSI is the most comprehensive and rigorous assessment of financial secrecy worldwide.

According to TJN, new criteria include checking if a jurisdiction provides for: A public register of ownership and annual accounts of limited partnerships; A public register of ownership of real estate and a central register of users of freeports for the storage of high value assets; Banking secrecy rules protected by criminal law (risk of prison terms for banking whistleblowers; Public access to tax court verdicts and proceedings, both in criminal and civil tax matters: Mandatory Legal Entity Identifiers for companies created in its territory: Harmful tax residency and citizenship rules; Public access to unilateral tax rulings and robust local filing requirements for Country-By-Country Reports; Unregistered bearer shares for companies & large banknotes; Public statistics on its cross-border financial and economic activities; and Mandatory reporting obligations of tax avoidance schemes.

While all jurisdictions should become fully transparent, the goal of the Financial Secrecy Index is to draw attention at where action is needed the most, it says.

By Emmanuel K. Dogbevi
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